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San Francisco restaurants have been tacking on surcharges for employee health care and then simply keeping the money.

After the Board of Supervisors today voted 6-5 to bar San Francisco businesses from pocketing money they and their patrons set aside for employee health care, Mayor Ed Lee faces a tough but telling choice: Whether to heed business community demands that he veto legislation that has wide labor and consumer support. A veto is widely expected, but complicating that decision is the position that was staked out today by one of his main rivals as a mayoral candidate, Leland Yee, who issued a statement echoing supporters claims that this is an issue of workers’ rights and consumer protection versus corporate greed: “This is a defining issue of who we are as a city. If Ed Lee vetoes this legislation, one of my first acts as Mayor will be to reverse his veto and sign this legislation into law.”Neither Lee’s mayoral nor campaign spokespersons answered a Guardian email about whether he will veto the measure, which would kill it unless two supervisors who opposed the measure (David Chiu, Sean Elsbernd, Mark Farrell, Carmen Chu, and Scott Wiener) break ranks, which is unlikely given the polarization on this measure. San Francisco Chamber of Commerce officials have made a top priority of killing the measure, even threatening to withdraw support from Prop. C, the pension reform measure that they helped create with Lee.At issue is the roughly $50 million per year that San Francisco businesses have been taking from health savings accounts they create for employee health care – funds that are often subsidized by 3-5 percent surcharges that many restaurants have chosen to tack onto their customers bills – under legislation that then-Sup. Tom Ammiano created to require employers to provide health care coverage for their employees.The position of the Chamber – which fought Ammiano’s legislation and supported years of unsuccessful lawsuits challenging it – is that this $50 million “loss” to city businesses would be a “job killer.” Chiu has also accepted that paradigm and introduced legislation that would let businesses use that money, but require them to let employees know they can tap into it and other reforms. But supporters of the legislation say these businesses are deceiving their customers, defying city law, and stealing from their employees.“People have tried to complicate this issue, but it is a simple issue. It’s about the right of workers to have health care,” Sup. David Campos, the author of the legislation, said at today’s hearing. Campos said he would limit his comments, given how widely the issue has already been discussed, and he announced a limitation on how long employees could tap the fund after their termination “in the spirit of compromise.” But then opposing supervisors attacked the measure, its timing, and supporters’ refusal to “compromise,” with Elsbernd chiding Campos that his legislation is “not the best way to encourage jobs.” So Campos went into more detail about why his measure was needed, noting that Chiu’s alternative would cap an employee’s access to health care at just $4,300, far less than the cost of a night’s hospital stay and a small fraction of the cost of a serious ailment. “You’re looking at a situation where very little could be provided for them,” Campos said. He also said how important it is to ban the fraudulent practice of restaurants charging customers for employee health care costs and then simply keeping the money, a practice that a recent Wall Street Journal investigation discovered was widespread. Campos said 80 percent of the money collected on diners’ bills is pocketed by the restaurants. “When consumers are paying for this, the expectation is that workers will have basic coverage,” Campos said, noting that his legislation would guarantee that “every cent that that consumer pays is actually spent on health care…This is not just about workers, it’s about consumer protection.”Even worse, Campos noted that these consumers are actually paying twice for restaurant employees’ health coverage, first on their dinner bills, and then again as taxpayers when those uninsured employees end up in General Hospital with their expenses paid for by the city.Under the federal ERISA law – which was the basis for the failed lawsuit challenging the city program, brought primarily by the Golden Gate Restaurant Association – the city cannot tell employers how to provide health coverage, and so they have the option of providing health insurance, paying into the city’s Healthy San Francisco plan, or providing the medical savings accounts that this legislation addresses.Sup. Jane Kim said she supported the legislation largely because of the horror stories she’s heard from employees who not only weren’t told of the existence of these accounts, but who were denied payment for medical procedures even after they learned about them. She also said the city could be vulnerable to another ERISA lawsuit if it took Chiu’s approach of directing how businesses used their funds, citing an earlier discussion of the board’s role in protecting the city from litigation.On that issue, Kim today introduced an alternative to legislation by Farrell and Elsbernd that would end the city’s program of providing matching funds to publicly financed mayoral and supervisorial candidates once their privately financed competitors break the spending cap. The US Supreme Court recently ruled a similar program in Arizona to be unconstitutional.The Chamber and other downtown groups – mostly supporters of Mayor Lee, who are close to breaking the spending limits – had signaled their intent to sue the city over the issue. The Farrell/Elsbernd legislation, which needed eight votes to change the voter-approved program, today failed on a 6-5 vote, with Sups. Campos, Kim, John Avalos, Eric Mar, and Ross Mirkarimi opposed.